Iran conflict disrupts global supply chains beyond oil prices

The ongoing Iran conflict is causing significant delays and increased costs across shipping and air freight networks, risking shortages and price hikes for essential goods worldwide.

The war centred on Iran has constricted more than crude: it is propagating delays and added costs across global maritime and air freight networks, threatening supplies of everything from medicines and microchips to fertiliser feedstocks.

According to the Associated Press, tanker traf...

fic through the Strait of Hormuz has all but stopped, leaving a significant number of vessels immobilised in the Persian Gulf or rerouted on far longer voyages. Shipping analytics firm Clarksons Research estimates roughly 3,200 ships, about 4% of global tonnage, are idle inside the Gulf, though that total includes some 1,231 vessels whose operations are typically confined to the region. About 500 ships, equal to roughly 1% of global tonnage, are recorded as waiting off UAE and Omani ports. These dislocations, while a small slice of world tonnage, can cascade into wider port congestion and schedule knock‑on effects, industry executives warn.

“This is really causing some major impacts within the global supply chain,” said Patrick Penfield, professor of supply chain practice at Syracuse University. “As this conflict keeps progressing, you’ll start to see some shortages, you’ll see some major price increases.”

Beyond oil: manufactured goods and inputs at risk

The Gulf region is not only a conduit for about one‑fifth of global crude; it is also a source of petrochemical feedstocks and nitrogenated products used to make plastics and fertiliser. In addition, cargo routed through Middle Eastern maritime chokepoints carries high‑value and time‑sensitive shipments: pharmaceuticals manufactured in India, semiconductors and batteries produced in Asia, and other components that underpin manufacturing worldwide. Industry observers say prolonged disruption raises the prospect of shortages and higher prices for those goods.

Maritime carriers are already altering operations to avoid the most exposed waterways. Major liner Maersk, having resumed some transits of the Suez corridor and Red Sea, announced it was rerouting vessels around the Cape of Good Hope to sidestep volatile zones. The detour can tack on an extra 10 to 14 days to voyage times and, by one industry estimate, around $1 million in additional fuel per ship. Higher fuel consumption, extended sailings and heightened exposure to conflict have prompted carriers to levy fuel and “war risk” or “emergency conflict” surcharges, increasing landed costs for shippers and their customers.

Air freight strains magnify the problem

Air cargo capacity has been squeezed as airlines and states close airspace or ground services in parts of the Gulf, including airports in the UAE, Qatar, Bahrain, Kuwait, Iraq and Iran. The three large Gulf carriers, Emirates, Qatar Airways and Etihad, operate dedicated freighters and carry substantial volumes in passenger holds; closures therefore remove a significant slice of premium, time‑sensitive capacity. Boeing data cited by industry analysts indicates that although air freight makes up less than 1% of global tonnage, it accounts for about 35% of trade by value because it transports perishable and high‑value goods such as pharmaceuticals and electronics.

“Remember, there’s a lot of pharmaceutical products that are made in India and then exported to different countries around the world. If that’s disrupted, that has a huge, huge, huge impact,” said Henry Harteveldt, an airline analyst with Atmosphere Research Group. Airlines are already forecasting tighter belly and freighter capacity, surcharges and added jet‑fuel costs, and logistics specialists expect airfreight rates to rise as demand outstrips available lift.

Policy responses and commercial measures

Faced with shrinking private insurance and rising premiums for vessels in the region, the US administration moved to offer political‑risk insurance for tankers traversing the Gulf and signalled naval escorts as a contingency. On social media the president said he had instructed the US International Development Finance Corporation to provide such insurance “at a very reasonable price,” and added that the US Navy could escort ships through the Strait of Hormuz if needed. The navy already has destroyers and littoral combat ships deployed in regional waters and has provided protective transits in past crises.

Marine insurers had been withdrawing cover or imposing steeper rates before the latest escalation, prompting governments and carriers to consider alternative risk‑sharing arrangements. Even so, rerouting around southern Africa, the cancellation of port calls and temporary closures of key airports will add cost and delay, with freight forwarders and shippers passing some of those increases down the chain.

An industry accustomed to shocks

Logistics firms say the sector is adaptable after recent years of disruption, pandemic bottlenecks, labour shortages and prior Middle East flare‑ups forced carriers and ports to build contingency plans and flexible routing options. “The specific situation that’s happening is pretty unprecedented, so it’s very unique from that perspective,” Michael Goldman, general manager North America of CARU Containers, told reporters. “(But) for the last few years the industry just kind of runs on disruption. So in terms of our industry having disruption, that is nothing new. That’s more of the same.”

Nevertheless, analysts caution that the breadth of goods affected and the interaction of air and sea constraints mean the economic consequences could widen the longer hostilities persist. The combination of stretched inventories for critical medical and electronic components, longer transit times for bulk and containerised cargo, and surcharges on freight may translate into higher consumer prices and supply shortfalls in sensitive sectors unless routes and insurance markets stabilise.

Source: Noah Wire Services